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File this under car wreck, as in, you don't really want to see it, but you cannot look away. I'm talking about the latest batch of housing numbers. They all show pretty much the same thing: sales slacking off, inventories rising.

Builders like Toll Bros. are saying they've never seen anything so bad in, oh, half a century. Builders, of course, aren't the only companies to see their stocks get whacked. Lenders like Accredited Home Lenders and Countrywide Financial have been hammered, as has H&R Block, which announced one of what I suspect will be many charges for bad loans. Oh hey, and put First Horizon into the group that's hurting for lack of lending.

The home 'investment' industryI'm sure others have noticed, as I have, the increasingly desperate pleas from the housing-bubble cheerleaders, especially National Association of Realtors Chief Economist David Lereah. A longtime bubble denier — who, I think, is more interested in protecting his constituency of six-percenters than in offering realistic housing-market commentary — Lereah began asking the Fed to protect his bubble a couple months back. At the same time, he and his associates have tried to spin the situation with the news media, who, hungry for soundbites, are usually all too happy to parrot headlines such as "Existing-home sales down with softening prices."

That's the title of the latest "no reason for fear" release, which you can find here. You can see, especially in the remarks toward the bottom, the NAR's devotion to trying to convince Americans that housing is a no-lose "investment."

That doesn't quite square with the soundbite available via a Bloomberg story on the numbers. There, Lereah reportedly said, "It's very important that the Fed understand the fragile state of the housing market. It's very important that the Fed maintain the status quo, keep rates where they are."

Translation: "Pleeeez Gawwwd don't take away their free money! Do that and we're all sunk!"

If it's disconcerting that the most prominent housing bulls are, when we're not looking, begging for economic policies aimed at shoring up their crumbling story, then this might be much worse.

How about if the last shred of the housing bull story turned out to be — how do you say? Untrue?

Wait, what did that house sell for?You've probably heard it repeated all over the news. Sure, housing sales are down and inventories are up, but so are prices? You might even wonder how that squares with reality if you, as I do, note the number of street signs sporting add-on boards declaring "new price."

It turns out that the anecdotal evidence for falling prices may be exactly right, because a large number of housing sale prices may be based on fudged numbers.

That's right, the last leg of Greenspan's bubble may be collapsing under the weight of farcical accounting — trickery that would get you tossed in jail if you tried it at an American corporation.

Many economists and commentators have begun to point out that housing prices are inflated to an unknown degree by seller concessions: rebates on closing costs, swimming pools, new kitchen countertops, luxury trips once a year for life and other goodies detailed in a recent New York Times article. These and other expensive sweeteners are now par for the course as desperate sellers try anything to move their houses.

There are plenty of reasons this occurs. First and foremost is that the homebuilding and home-selling industry depends on the perception that housing is a no-lose investment in order to continue hawking its wares. Agents, of course, get paid based on selling price, so you can be darn sure they'd rather see under-the-table concessions than straight price drops.

Homebuilders don't want to cope with the revolts that come from the first crop of suckers ... er, buyers when they have to drop prices on the new development of "executive estates." And finally, as I've seen firsthand in some interesting D.C.-area online chats, neighbors buying into the top of a bubble can get very angry when someone breaks rank and sells a home for (gasp!) what the market will pay, rather than what the bubble-equity dreamers hope and suppose it's worth.

The problem is that these real costs don't appear in the selling price, thus distorting reality and effectively continuing the pleasant myth that Americans have become comfortable embracing: House prices don't drop. Unfortunately, they do. The Wall Street Journal recently published a harrowing tale of someone who got only half the $1 million-plus she thought her D.C.-area home was worth. Isolated case? I'm sure there are a lot of folks out there hoping so.

Twisted ARMs If my suspicions are correct, even this little magic trick won't shore up prices for long. Oversupply in the face of negative growth in real wages, together with higher borrowing costs, eventually will have to lead prices downward. And I think we're only at the tip of the iceberg when it comes to seeing other forms of mild and wild financial shenanigans that pumped this bubble to the bursting point. I've been saying for some time that I thought the appraisal business was a funky racket, and it appears to be giving some folks big problems when they want to refinance.

And speaking of loans, how about those adjustable-rate mortgages? In another good story by Wall Street Journal reporter Ruth Simon, recent numbers and analysis confirm what I've long been predicting, that many of the people talked into these gimmicky "affordability" products did not, in fact, know the consequences. Now that they've tapped all their bubble equity and rate adjustments are coming, dropping prices are leaving them in a very bad spot.

This statement, from a broker out of California, says it all: "They've upgraded their houses, put in a pool and bought themselves Hummers and BMWs. Now they can't get it refinanced and they can't sell."

Foolish bottom line
What that means for the rest of us, even those of us who didn't jump in and pay half a million for a run-down wreck — well, that's a good question. Personally, I think that our high-end retailing friends, from Nordstrom to Coach, have less to fear from the gas-price bogeyman than they do from the hissing housing bubble.

If the amount of consumer spending that arose from fictional home equity is as large as some predict, the American consumer is going to have a lot less dough to blow on $600 backpacks, $350 jeans, $3,000 flat-screen TVs and the like. Let's just say that, as much as I'm a fan of Best Buy, I'm not sure I'd be buying shares right now.

If you think I'm overreacting, take a look around. My fears and suspicions are a dose of sunshine compared to what some others foresee. If NYU economics professor Nouriel Roubini is correct — and his reasoning looks pretty sound — the coming bust will trigger a pretty hefty recession. This would be a recession that would make the tech bust look like good times.

Is your portfolio ready for that? Are your personal finances ready for that?